A Rick-A-Day keeps the intelliegence at bay
“We went into a recession in 2008 because of gasoline prices,” Santorum told a packed hotel ballroom of supporters. “The bubble burst in housing because people couldn’t pay their mortgages because of $4 a gallon gasoline,” he added.
From : http://www.buzzfeed.com/zekejmiller/santorum-gas-prices-caused-the-2008-recession
‘One Democratic economist points out four problems with Santorum’s argument’:
1) The NBER business cycle dating commission said the recession began in December of 2007 and he’s talking about prices in summer 2008.
2) Lehman fails in September 2008 and the economy collapses. That leads gasoline prices to plunge precipitously (check out the price series at http://gasbuddy.com/gb_retail_price_chart.aspx and click on the 5 year or 4 year graph) according to all analysts at the time because people understand output will be falling, not the other way around.
3) By Santorum’s reasoning, why didn’t the fall in gasoline prices from a record of 4.12 in summer 08 or from 3.75 in September 08 down to 1.61 in December 08 lead to a big recovery? Obviously the economy is driving the gasoline price not the other way around.
4) High gas prices hit consumers, no question, but the average person drives about 10k miles and gets 20 mpg so uses about 500 gallons. If gas prices go up a full $1 per gallon, that’s an extra $500 bucks a person or around $1000 per household. That’s a tough hit but compared to a 14.5 trillion economy, it’s hard to see that causing the recession.